Instructions For Form 1120-Pc - 2006 (Page 15 of 20) in pdf

243(c), or 245(a). Generally,

Also, include on line 8 dividends from

count certain days during which the

debt-financed stock is stock that the

FSCs that are attributable to foreign trade

corporation’s risk of loss was diminished.

corporation acquired by incurring a debt

income and that are eligible for the 100%

See section 246(c)(4) and Regulations

(for example, it borrowed money to buy

deduction provided in section

section 1.246-5 for more details.

the stock).

245(c)(1)(A).

Preferred dividends attributable to periods

•

Dividends received from a RIC on

totaling less than 367 days are subject to

Line 9. Enter only those dividends that

debt-financed stock. The amount of

the 46-day holding period rule above.

qualify under section 243(b) for the 100%

dividends eligible for the

c. Dividends on any share of stock to

dividends-received deduction described in

dividends-received deduction is limited by

the extent the corporation is under an

section 243(a)(3). Corporations taking this

section 854(b). The corporation should

obligation (including a short sale) to make

deduction are subject to the provisions of

receive a notice from the RIC specifying

related payments with respect to positions

section 1561.

the amount of dividends that qualify for

in substantially similar or related property.

The 100% deduction does not apply to

the deduction.

5. Any other taxable dividend income

affiliated group members that are joining

not properly reported above.

Line 4. Enter dividends received on

in the filing of a consolidated return.

preferred stock of a less-than-20%-owned

Line 10, column (b). Enter foreign

Line 17. Dividends received on

public utility that is subject to income tax

dividends not reportable on lines 3, 6, 7 or

debt-financed stock acquired after July

and is allowed the deduction provided in

8 of column (b). Include on line 10 the

18, 1984, are not entitled to the full 70%

section 247 for dividends paid.

corporation’s share of the ordinary

or 80% dividends-received deduction.

Line 5. Enter dividends received on

earnings of a qualified electing fund from

The 70% or 80% deduction is reduced by

preferred stock of a 20%-or-more-owned

line 1c, Form 8621, Return by a

a percentage that is related to the amount

public utility that is subject to income tax

Shareholder of a Passive Foreign

of debt incurred to acquire the stock. See

and is allowed the deduction provided in

Investment Company or Qualifying

section 246A. Also, see section 245(a)

section 247 for dividends paid.

Electing Fund. Exclude distributions of

before making this computation for an

Line 6. Enter the U.S.-source portion of

amounts constructively taxed in the

additional limitation that applies to

dividends that:

current year or in prior years under

dividends received from foreign

•

Are received from

subpart F (sections 951 through 964).

corporations. Attach a schedule showing

less-than-20%-owned foreign

how the amount on line 17 was figured.

Line 11, column (b). Include income

corporations, and

constructively received from controlled

Line 23, column (b). Generally, line 23,

•

Qualify for the 70% deduction under

foreign corporations under subpart F. This

column (b), cannot exceed the amount

section 245(a). To qualify for the 70%

amount should equal the total subpart F

from the worksheet on page 16. However,

deduction, the corporation must own at

income reported on Schedule I of Form

in a year in which an NOL occurs, this

least 10% of the stock of the foreign

5471, Information Return of U.S. Persons

limitation does not apply even if the loss

corporation by vote and value.

With Respect to Certain Foreign

is created by the dividends-received

Also include dividends received from a

Corporations.

deduction. See sections 172(d) and

less-than-20%-owned foreign sales

246(b).

Line 12, column (b). Include gross-up

corporation (FSC) that:

for taxes deemed paid under sections 902

•

Are attributable to income treated as

and 960.

effectively connected with the conduct of

Schedule E—Premiums

Line 13, column (b). Include the

a trade or business within the United

following.

Earned

States (excluding foreign trade income)

1. Dividends (other than capital gain

and

•

Definitions

distributions reported on Schedule D

Qualify for the 70% deduction under

(Form 1120) and exempt-interest

section 245(c)(1)(B).

Undiscounted unearned premiums

dividends) that are received from RICs

Line 7. Enter the U.S.-source portion of

means the unearned premiums shown in

and that are not subject to the 70%

dividends that:

the annual statement filed for the year

•

deduction.

Are received from 20%-or-more-owned

ending with or in the tax year.

2. Dividends from tax-exempt

foreign corporations, and

Applicable interest rate means the

•

organizations.

Qualify for the 80% deduction under

annual rate determined under section

3. Dividends (other than capital gain

section 245(a).

846(c)(2) for the calendar year the

distributions) received from a REIT that,

Also include dividends received from

premiums are received.

for the tax year of the trust in which the

a 20%-or-more-owned FSC that:

dividends are paid, qualifies under

•

Applicable statutory premium

Are attributable to income treated as

sections 856 through 860.

recognition pattern means the statutory

effectively connected with the conduct of

4. Dividends not eligible for a

premium recognition pattern in effect for

a trade or business within the United

dividends-received deduction, which

the calendar year the premiums are

States (excluding foreign trade income)

include the following.

received, and is based on the statutory

and

a. Dividends received on any share of

•

premium recognition pattern which

Qualify for the 80% deduction provided

stock held for less than 46 days during

applies to premiums received by the

in section 245(c)(1)(B).

the 91-day period beginning 45 days

corporation in that calendar year. For

Line 8. Enter dividends received from

before the ex-dividend date. When

purposes of the preceding sentence,

wholly owned foreign subsidiaries that are

counting the number of days the

premiums received during any calendar

eligible for the 100% deduction under

corporation held the stock, you cannot

year will be treated as received in the

section 245(b).

count certain days during which the

middle of such year.

In general, the deduction under

corporation’s risk of loss was diminished.

Line 1. Enter gross premiums written on

section 245(b) applies to dividends paid

See section 246(c)(4) and Regulations

insurance contracts during the tax year,

out of the earnings and profits of a foreign

section 1.246-5 for more details.

less return premiums and premiums paid

corporation for a tax year during which:

b. Dividends attributable to periods

for reinsurance. See Regulations section

•

All of its outstanding stock is directly or

totaling more than 366 days that the

1.832-4.

indirectly owned by the domestic

corporation received on any share of

Lines 2a and 4a. Include on lines 2a and

corporation receiving the dividends, and

preferred stock held for less than 91 days

•

4a:

All of its gross income from all sources

during the 181-day period that began 90

is effectively connected with the conduct

days before the ex-dividend date. When

1. All life insurance reserves, as

of a trade or business within the United

counting the number of days the

defined in section 816(b) (but determined

States.

corporation held the stock, you cannot

under section 807) and

-15-

Instructions for Form 1120-PC

Instructions For Form 1120-Pc - 2006 Page 15

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